The opinion of the court was delivered by: SIRICA
This case comes before the Court on the motion of the defendant Mabro Construction, Inc., to stay proceedings pending arbitration and to compel arbitration.
Suit was filed by plaintiff Mayhew, Inc., a subcontractor, against Mabro Construction, Inc., a general contractor, for monies due for labor and materials furnished. The parties had signed a contract in November, 1972, whereby the plaintiff agreed to paint and cover the walls of the Foxhall Apartments which the defendant was building. The contract contained a clause providing that:
"Any dispute arising under this contract shall be submitted to arbitration in accordance with the provisions, then obtaining, of the Standard Form of Arbitration Procedure of the American Institute of Architects. . . . The Subcontractor agrees that he will not take any legal action or institute proceedings of any kind for the enforcement of what he may deem to be his rights in connection with the subject matter of any dispute between himself and the Contractor until the Contractor either shall have refused to submit the same to arbitration, or . . . shall have rejected or refused to comply with the decision of the Arbitrators. . . ."
A dispute arose between the parties concerning payments and concerning the schedule of performance. A meeting was held about November 27, 1973, by the parties at which time they discussed cancelling or suspending or terminating the contract, and an agreement (now disputed) was made. Thereafter, plaintiff did no more work for defendant. Defendant bought from plaintiff his remaining inventory of paint and wall covering, but did not pay for the work plaintiff had done. Instead, on February 14, 1974, Mabro filed a demand for arbitration, claiming that Mayhew owed the defendant $138,478.10, the cost of completing the painting and wall covering.
On March 8, 1974, Mayhew filed this suit for monies due for labor and materials, claiming $39,894.67 is owed by defendant for the reasonable worth of work and materials furnished. On March 28, 1974, the defendant filed the instant motion to stay proceedings pending arbitration (9 U.S.C. § 3) and to compel plaintiff to submit to arbitration (9 U.S.C. § 4).
Title 9 of the U.S. Code, Section Three, provides that "upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration" a federal court shall stay court proceedings until after arbitration has been had.
Section Four provides that if one party to an arbitration agreement fails to arbitrate, a federal court shall, "upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue," order the refusing party to proceed with arbitration. But if either of these points is in issue, a hearing must be held on that issue by the Court, and the party alleged to be in default can demand jury trial.
In this case the plaintiff raises as a defense to the motion the claim that the contract which contained the arbitration clause was canceled by mutual agreement of the parties at the November 27, 1973 meeting.
The issue, then, is whether a dispute arising out of a contract containing an arbitration clause is referable to arbitration if it is claimed that the parties mutually canceled the contract; or does the claim of mutual cancellation put "the making of the agreement for arbitration . . . in issue," necessitating a trial on that point?
In favor of referring the entire dispute to arbitration is the general principle that questions of arbitrability are initially for arbitrators.
"[Any] doubts as to the construction of the [Arbitration] Act ought to be resolved in line with its liberal policy of promoting arbitration both to accord with the original intention of the parties and to help ease the current congestion of court calendars." Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 410 (2d Cir. 1959) cert. dismissed 364 U.S. 801, 81 S. Ct. 27, 5 L. Ed. 2d 37 (1960).
In Petition of Ropner Shipping Co., Ltd., 118 F. Supp. 919 (S.D.N.Y.1954) a petition to compel arbitration was resisted on the grounds that there had been an accord and satisfaction. In rejecting the objection, the Court noted: "But the issue of mutual cancellation of the agreement is one to be determined by the arbitrators and not the Court." Id. at 920.
In World Brilliance Corp. v. Bethlehem Steel Co., 342 F.2d 362 (2d Cir. 1965) a party objected to a motion to compel arbitration on the ground that the other party had waived his right to seek arbitration. Arguing that "waiver 'unmakes' the arbitration agreement" that party claimed that the issue was for the courts, not arbitrators, to decide. The Second ...